Day the City snubbed US tech tycoon’s £18bn float
Snapchat billionaire fails to charm City fund bosses
A CHARM offensive by Snapchat’s billionaire boss to attract investors for the tech firm’s float has been shunned by UK fund bosses.
Evan Spiegel, who is engaged to model Miranda Kerr, is hoping to gain the backing of major City investors for the £18bn float of the tech firm later this year.
But at a meeting in London this week some of the biggest names in the City were left unimpressed by the firm’s ability to yield a profit for British savers.
The float of Snap Inc – the company name for the five-yearold photo-messaging app – will be the biggest tech float since Facebook. The firm, which allows users to send pictures that disappear after they have been viewed, has never made a profit.
Chief executive Spiegel, 26, was joined at Monday’s event by Barclays chief executive Jes Staley who introduced the presentation.
Barclays is underwriting the deal, along with lead bankers Morgan Stanley and Goldman Sachs. But investors who attended the event were concerned Spiegel gave no forecasts of future revenues or how quickly Snapchat thinks it can make money out of its users.
It sparked questions over how Snap Inc planned to convert users into cash. And others questioned a slowdown in the growth of users in the last three months of 2016, falling below 50pc for the first time since 2014. It now has 158m daily users. Increasing users is considered vital for tech firms as this is what is believed will make them profitable one day.
Some investors have also been put off by a controversial decision not to allow new shareholders to have voting rights.
Investors will be gambling on the notion Spiegel and his colleagues – who are also in their 20s – will work out how to make the business make a profit with little input from shareholders. Mike Fox, head of sustainable development at UK pension fund firm Royal London Asset Management, said they would ‘not be participating in Snap’s initial public offering’. The lack of any voting rights for shareholders was a ‘major red flag’, he said.
‘It is worth noting that while many US tech firms have delivered tremendous returns for investors following their listing, performance of firms in this sector has not always matched investor expectations following an IPO,’ he added.
Snapchat is also facing greater competition from rival Facebook, which owns apps Instagram and WhatsApp. And there is also a danger the app’s 18-34-year-old user base could jump ship as soon as the next big thing comes out. Snap’s estimated valuation is expected to be around 49 times revenue, compared to Facebook’s 27 times at its own IPO.
Richard Saldanha, global equities fund manager at Aviva Investors, said: ‘ Investors should tread with caution here’
However, some investors at the show were won over. One said: ‘Management did a good show, they were very convincing.’
Snap did not respond to a request for comment